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King & Wood Mallesons obtains successful GAFTA Award

King & Wood Mallesons (KWM) obtained a successful award for an Australian exporter of grain against a defaulting buyer based in the People’s Republic of China (PRC), in an international arbitration under the auspices of the Grain and Feed Trade Association (GAFTA) in London.

KWM Dispute Resolution Partner Michael Lundberg, supported by Senior Associate Danielle Eaton, and Solicitors Acacia Hosking and Sarah Curnow acted for the Australian exporter, seeking damages for a default under a large volume commodity contract.

The commodity contract was concluded by exchanges of written communications and telephone calls, as well as by text messages. However, following a significant drop in the global market price for barley in 2015, the PRC buyer refused to honour the contract without a legitimate reason.

The Perth KWM team, on behalf of the Australian exporter, pursued a damages claim against the buyer pursuant to the standard GAFTA default clause incorporated into the contract - which entitles the innocent seller to damages equivalent to the difference between the agreed contract price and the market price when the commodity is re-sold.

Commenting on the matter, Partner Michael Lundberg said; “We were ultimately able to secure a substantial award in favour of the Australian exporter, requiring the PRC buyer to pay damages together with compound interest.”

GAFTA awards are enforceable globally pursuant to the New York Convention, including in the PRC and 155 other countries.

The process for recognition and enforcement of international awardsin the PRC was the subject of a recent article prepared by the Shenzhen office of KWM.The article highlighted that, with the Belt and Road initiative likely to drive significant outbound investment by Chinese companies, the ability to enforce foreign arbitral awards in the PRC is becoming a key issue for these companies and their Belt and Road counterparties.

A review of applications to enforce foreign arbitral awards in the PRC was conducted by the Shanghai office of KWM in 2016. The review demonstrated that the number of applications for enforcement and the average enforcement rate increased substantially over the period from 1994 to 2015.